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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity






2. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability






3. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price






4. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.






5. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices






6. A firm that has market power in the factor market (a wage-setter)






7. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur






8. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC






9. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF






10. The lost net benefit to society caused by a movement away from the competitive market equilibrium






11. The price of a good measured in units of currency






12. The total quantity - or total output of a good produced at each quantity of labor employed






13. Ei > 1






14. Ei = (%dQd good X)/(%d Income)






15. AFC = TFC/Q






16. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good






17. The change in quantity demanded resulting from a change in the price of one good relative to other goods






18. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)






19. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied






20. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price






21. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic






22. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good






23. 0 < Ei < 1






24. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run






25. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus






26. Two goods are consumer substitutes if they provide essentially the same utility to consumers






27. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand






28. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand






29. Occurs when LRAC is constant over a variety of plant sizes






30. Goods that are both rival and excludable. Only one person can consume the good at a time and consumers who do not pay for the good are excluded from consumption






31. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax






32. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity






33. Ed < 1






34. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it






35. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment






36. A period of time too short to change the size of the plant - but many other - more variable resources can be changed to meet demand






37. Exists if a producer can produce a good at lower opportunity cost than all other producers






38. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good






39. The rational decision maker chooses an action if MB = MC






40. A very diverse market structure characterized by a small number of interdependent large firms - producing a standardized or differentiated product in a market with a barrier to entry






41. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good






42. Measures the cost the firm incurs from using an additional unit of input. In a perfectly competitive labor market - MRC = Wage. In a monopsony labor market - the MRC > Wage






43. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.






44. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.






45. Ed = 0 - no response to price change






46. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.






47. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms






48. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately






49. Entry of new firms shifts the cost curves for all firms downward






50. The mechanism for combining production resources - with existing technology - into finished goods and services